Critical illness insurance plan is useful to take care of immediate financial requirements in the event of critical diseases. Here is an analysis of such plans offered by insurers
LIFE seems to be undone when diagnosed with critical illness. Worries of dooming health haunt not only the suffering individual but also his dependants. In this situation, having critical illness insurance plan is a lot more useful to take care of immediate and future financial requirements.
Critical illness products are primarily insurance products that cover specific illnesses. This is a payout product. Along with general insurance companies, most of the life insurance companies also provide it as a rider attached to life insurance product. These riders with similar benefits are much cheaper to buy. Critical illness, unlike other health products, does not require insurance companies to reimburse on the event of hospitalisation. On the contrary, a one-time, tax-free lump sum is offered in the event of the diagnosis of a critical illness.
In case of other health products, insurance companies make upfront payments to hospitals when an eventuality occurs. But, sometimes insurance companies bar certain hospitals from such an arrangement. This forces the insurer to make the payment to the hospital and then apply for a reimbursement. The problem does not occur in case of critical illness products since the insured person gets a lump sum once the illness is diagnosed.
Insurers provide a detailed list of covered illnesses under this product. Common diseases covered are heart attack, cancer, stroke, multiple sclerosis, kidney failure, major organ transplant, paralysis, heart valve replacement and repair. A major limitation of the product is that the claim is acknowledged only under the specific circumstances noted in the policy. A diagnosis of cancer, for example, may not be enough to trigger payment of the policy if the cancer has not spread beyond the initial point of discovery or is not life threatening. Other restrictions may include a specific number of days the policyholder must be ill or must survive after diagnosis.
In the general insurance spectrum, only five companies including National insurance, Bajaj Allianz, ICICI Lombard, Tata AIG General and Iffco Tokio General, offer critical illness product.
Bajaj Allianz has the lowest premium charges while National Insurance has the highest among all. Most of the life insurance companies also provide critical illness in the form of riders that can be included with an underlying life insurance product. One can attach riders in any of the insurance products may it be term plan, endowment plan or unit-linked plan. The riders are charged separately. But the premium on riders is much low as compared to general insurance companies, though the illnesses covered are almost the same.
For instance, a 35-year-old healthy male, who invests Rs 50,000 in LIC Money Plus I, and opt for critical illness rider for sum insured of 10 times the premium. In that case, the cost of critical illness rider would be Rs 3,125, vis-àvis Rs 5,408 charged by National Insurance under the same condition. Thus one has dual benefit of life cover and health cover under one roof. The number of critical illness covered under both is almost the same. The flip side to this is that when critical illness is clubbed along with life insurance, it compulsorily has to be continued for long term as against one-year renewal plans of the general insurance companies. Stand alone critical illness products by life insurance companies is another genre. These products cover more diseases than the earlier two. ICICI Prudential Life Insurance covers almost 35 diseases, while HDFC standard Life covers 30. These products charge almost the same as general insurance with more sickness coverage. Also companies, such as LIC have introduced unit-liked health products where premium are invested in the market, this is like Ulip with various charges like premium allocation, policy administration and fund management charges. The only good thing is the premium paid is not an expense but an investment. So in case, there is no claim for any critical illness a fund value is returned at the end of the term.
Another interesting kind of health product is cash-back plans, where in the premium invested is returned to the policyholder in case no claim occur during the policy tenure. Beyond this, there are other options of health cover like individual hospital care, family floater, daily hospitalisation plan and senior citizen plan. All these are indemnity plans, which not always cover these serious illnesses. Treatment costs at private healthcare facilities where one is most likely to land up during a critical illness are increasing rapidly. This is specifically true for illnesses like heart attack, cancer, stroke etc, which is most expensive of all. Hence, it makes sense to have a policy cover.
